ESG is no longer just a buzzword but an integral part of business operations for which we must be prepared. It involves achieving sustainable outcomes for the benefit of the environment and society and conducting business in a responsible and inclusive manner to ensure long-term resilience.
ESG stands for “Environmental, Social and Governance” representing three key factors to consider when measuring a company’s sustainability, ethics, and social responsibility.
Environmental Factors are related to the direct or indirect impact of business operations on the natural environment (e.g., climate change, environmental pollution, exploitation of natural resources, waste disposal, energy efficiency).
Social Factors pertain to business operations’ direct or indirect impact on stakeholders regarding universal values (e.g., working conditions, community relations, human rights, diversity).
Governance Factors involve processes, regulations, and institutions affecting companies’ management, administration, and control (e.g., policies and practices for compensation and board member independence).
What Are the Criteria for ESG Ratings?
Like any part of business analysis, ESG analysis is not uniform among all service providers. However, there is a consensus that successful ESG factor assessment relies on specific data types regardless of industry and geographic location. These include:
Environmental and Climate Change:
- Readiness and efforts to combat climate change
- Greenhouse gas emissions
- Management of climate and environmental risks
- Environmental pollution and resource use
- Biodiversity conservation
- Access to water
Social Responsibility
- Protection of human rights
- Workers’ rights protection
- Health and safety concerns
- Customer responsibility
Governance Issues
- Transparency in governance
- Structure and type of internal acts
- Anti-corruption measures
The Croatian Chamber of Commerce’s ESG rating employs clear, transparent criteria that include all regulatory requirements and the usual demands of financial institutions. It represents a balanced system of criteria from environmental and climate change, social responsibility, and governance issues. Additionally, it considers industry specifics and business models, products, and services based on sustainability development.